Economic prospects for 2023: mini-growth instead of recession

Federal Minister of Economics Habeck presented the annual economic report. The prospect: instead of a recession, a small increase in economic output. The report also deals with the restructuring of the economy.

In the new annual economic report, the federal government is somewhat more confident in its assessment of the economic situation than it was just a few months ago. Instead of a recession, the government now expects a small plus of 0.2 percent for this year. This emerges from the report presented today by Federal Economics Minister Robert Habeck (Greens).

The minister looks back on an eventful year that had a massive impact on economic development in Germany as well. “The last year has destroyed a lot of certainties and a lot of self-certainty in Europe and also in Germany,” said Habeck, referring to the Russian attack on Ukraine as well as the energy crisis.

Many decisions had to be made quickly, and companies and consumers also adapted quickly to the new circumstances. “Through this determination, this willingness to make and implement unusual and unusually big decisions, this country has managed to ward off a terrible economic crisis,” the minister summed up.

Slight growth ahead?

And looking ahead, he adds: “This means that the crisis is of course not over yet, that we are far from over. But that we were able to avoid the worst scenarios.”

The federal government now expects economic growth of 0.2 percent for the current year. That’s significantly less than last year. Since the gross domestic product had increased by 1.9 percent. The 0.2 percent is still a plus. Back in the fall, the federal government predicted that the economy would shrink in 2023. “But we must not forget that economic growth does not mean prosperity,” Habeck points out.

Most recently, the main focus was on energy supply

Fighting the crisis was the order of the day, but now an active economic policy is needed, says Marcel Fratzscher, President of the German Institute for Economic Research in Berlin: “We can see that Germany is losing its attractiveness in global competition. And that’s why we urgently need a change of course from the federal government here with a primary focus on investing in the future in this transformation.”

Economics Minister Habeck actually planned to do this a year ago – the title of his first annual economic report was: “For a social-ecological market economy. Shaping the transformation innovatively”. However, as is well known, the main focus in recent months has been on energy security. There is no real economic policy at all, according to the opposition.

Klöckner complains about too much bureaucracy

The federal government is accepting the loss of competitiveness without taking countermeasures, says Julia Klöckner, economic policy spokeswoman for the Union parliamentary group. There is also not less, but more bureaucracy, for example with the price brakes for energy: “The companies that come to me usually ask when they could be unleashed, it’s not about money or more subsidies, but that they can just do. They would like to hire engineers and other professions. But they say they have to hire more and more accountants because they have to do more documentation.”

She sees it as an alarm signal that the pharmaceutical company BioNTech is part of its Cancer research in England could relocate. According to Klöckner, Germany as a business location is at risk. DIW President Fratzscher first refers to the responsibility of companies:

Habeck also argues in this direction – he wants to trim the economy above all in the direction of climate protection: “Anyone who sticks to the old technologies, the fossil technologies, will not only have a problem because of climate protection, but also economically.”

Trade agreements yes – under clear conditions

This is also shown by the Inflation Reduction Act in the USA, a massive subsidy program with which a lot of money is flowing into the “green transformation”, as Habeck says. How Europe should react to this is still being debated. There shouldn’t be a subsidy race, says Habeck. He wants targeted subsidies for technologies without endangering trade. Rather, trade must be diversified in order to reduce dependencies on individual countries such as China. He wants to promote trade agreements as long as they contain social and ecological standards.

It is also not only a matter of the growth of the gross domestic product; for the second time, the annual economic report contains a chapter that is intended to evaluate other standards for measuring prosperity, such as inequality or CO2 emissions.